Protective Put + Short Call.....where is gain!!
From: Vandollar <mercdesdrvr@
To: ConservativeOptionS
Sent: Sun, Jan 3, 2010 8:54 pm
Subject: Re: [ConservativeOption
Although gettting your stock taken away at a profit is never a bad thing. It would seem like the trick to a stock like PFE would be to sell the calls at a premium enough to keep the stock and keep making the "CC dividend" I can handle STCG due to past loses so the option premiums are "tax free" to me
--- On Sun, 1/3/10, David <david135@pc3i.
From: David <david135@pc3i.
Subject: Re: [ConservativeOption
To: ConservativeOptionS
Date: Sunday, January 3, 2010, 11:25 AM
Unless I missed part of the conversation, what you are describing here
is more properly called a conversion.
conversion = long stock + long put + short call where the put and
call are corresponding (same month and strike) and the ratio is 1 to 1 to 1.
The conversion is a locked profit trade which is synthetically closed.
I'm not sure where I learned the following, so take it with a grain of salt:
IRS considers the conversion to be a taxable event as there is no longer
any risk in the trade. To avoid forming the conversion just vary the
strike or month on one of the options.
You may want to consult a competent tax attorney that specializes in
options trading if deferring a large profit to next year. IRS Pub 550
has some info, but I didn't find it very readable. Robert Green's book
"The Tax Guide for Traders" is an excellent resource.
Unfortunately, the tax consequences of certain types of positions are
one of the little problems which make option trading less fun for me.
regards,
david
Jack Wigandt wrote:
>
>
> Vandollar,
> Please excuse my feeble attempt at dry
> humor. No need to buy PFE, I already own two separate blocks of the
> stock and could continue selling calls and collecting dividends if I
> wish. My comment about placing a collar on PFE was in reference to the
> two directly opposite opinions I recently read from the "experts." I
> was thinking out loud that perhaps my best option would be sell $18
> calls and buy $18 puts to lock in profits and carry me home past the one
> year mark. We then enjoy the lower capital gains tax rate. At February
> expiration the market would tell me what to do but my profit from the
> past year and one additional dividend would be assured, insured and in
> my pocket no matter who is correct !
> Regards and good
> trading,
>
> Jack
>
>
> ------------ --------- --------- --------- --------- --------- -
> *From:* Vandollar <mercdesdrvr@ yahoo.com>
> *To:* ConservativeOptionS trategies@ yahoogroups. com
> *Sent:* Sat, January 2, 2010 10:48:11 AM
> *Subject:* Re: [ConservativeOption Strategies] pfe
>
>
>
> Sounds like you did well Jack, always glad to see that. Couldn't you
> just buy your PTE and go on?
>
> --- On *Fri, 1/1/10, Jack Wigandt /<nhhobbyfarmer@ yahoo.com
> <http://yahoo. com/>>/* wrote:
>
>
> From: Jack Wigandt <nhhobbyfarmer@ yahoo.com>
> Subject: Re: [ConservativeOption Strategies] pfe
> To: ConservativeOptionS trategies@ yahoogroups. com
> Date: Friday, January 1, 2010, 5:35 AM
>
>
> Vandollar,
> You know the rule of opinions, everybody's
> got one! Some of the free stuff I read from time to time as part of
> a sales pitch offer me 180 degree opposite opinions on PFE. One
> "expert", who's specialty is making money shorting weak stocks,
> tells of the coming disaster for many Dow stocks and recommends PFE
> LEAP PUT options to make you wealthy in 2010.
> On the opposite side of the field and from
> the very same publishing company, just yesterday, I read how PFE
> sales are expected to grow as pharmaceuticals are now one of our
> biggest exports and the weakling dollar makes our products even more
> accessible to the world. BUY PFE now to get rich as it climbs to
> $20/share+
> My last batch of PFE, I have held for
> just under one year and have a nice profit now.We wrote calls
> against the position each month and collected dividends. I guess the
> only thing to do is put a collar on it, collect one more dividend
> and then allow it to be called away or put it to someone else,
> depending on the market. I sure can not listen to the "experts",,, ,
> they can not agree on anything!
> Regards
> and good trading,
>
> Jack
> **
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